Royal Bank of Scotland Group (RBS) expects to raise up to $3.5 billion £2.2 billion) from selling off the first tranche of its US business Citizens Financial Group Inc in an initial public offering.

RBS said it intend to sell a 25 per cent stake, or 140,000,000 shares of Citizens common stock at a price range of between $23 and $25 a share.

The 81-per-cent taxpayer-based bank said it has also granted a 30-day over over-allotment option of up to 21,000,000 additional shares.

Citizens, which has around five million US retail customers, 1,200 branches and around $130 billion in assets, would be valued at around $14 billion, based on the top-end price.

RBS Group, which had acquired Citizens in a $440 deal in 1988, is now selling off non-core operations as it looks to shrink its balance sheet.

RBS announced plans last November for a partial listing of Citizens by the second half of 2014 with a view to fully exiting its US division by 2016.

Last January, RBS offloaded 94 of its Citizens branches, operating under the Charter One brand, for an undisclosed sum as part of a wider restructuring of Citizens with a view to exiting the business to focus on UK operations.

RBS Group chief executive, Ross McEwan, said: “We announced our intention to undertake an IPO of Citizens in February 2013 and today’s launch is an important milestone for both RBS and Citizens.

“The planned divestment will significantly improve RBS's capital foundation and is a further important step in making RBS a strong and secure bank that continues to fully support the needs of its customers.”